Abstract:

In the era of competitive global environment and technology-based
organisations, managers are pressured to find ways to maintain their competitive
advantage. Management has the responsibility to maintain their competitive advantage
whilst maintaining the profitability of the organisation. This responsibility includes
decisions regarding the retention of profitable customers, and the minimisation of costs
to improve profitability of services. The analysis of cost and profitability of individual
services and customers represents a critical issue with which Strategic Logistical
Alliance (SLA) should be concerned
SLA has proved to be a market leader within the logistics services market whilst
maintaining profitability in most of its core business functions, with the exception of the
warehousing and distribution function. The reasons for a lack of profitability in the
warehousing and distribution function are inadequate planning, controlling and
decision-making within these functions. The main reasons for these problems are
incorrect cost allocations, the non-reflection of the true cost of activities, unprofitable
pricing and the lack of effective performance management.
'The primary objective of this study is to analyse the existing cost allocation system, the
cost management system and the performance management system of SLA, focusing
on the warehousing and distribution functions. The study addresses the shortcomings
of the existing system and recommends activity-based performance management as a
possible solution. To achieve this primary objective, a number of secondary objectives
were relevant.
The research was conducted at SLA in Gauteng. The research comprised a literature
study and an empirical survey using structured interviews to obtain information from
relevant staff and managers. 'The empirical study was further extended by obtaining
permission from top management to gather information by observation of activities and
processes carried out by staff in the warehouse and distribution function.
For management of SLA to achieve their goal of becoming a profitable leading
third-party logistical service provider, a combination of tools should be used, which
include activity-based costing, cost management and performance management.
Activity-based performance management will enable management to gain useful
information for decision-making to achieve their goal.